Money Laundering & Terrorist Financing Impact on overall Economic Development
It has already been discussed that money laundering and terrorist financing have significant consequences influencing both on individuals and on the population globally. Here we come to even more global scale – money laundering and terrorist financing has a direct negative effect on overall economic development.
Money laundering and terrorist financing negatively affect economic growth as they divert resources to less productive activities. Laundered illegal funds choose to follow not the same path as legal funds. They are not placed in productive channels aimed at further development. Illegal funds are often placed into so-called sterile investments in order to preserve their value as well as to be at one’s disposal as easily transferable. Such investments are real estate, jewelry, antiques, art, luxury automobiles, etc. The above-mentioned investments are not as productive as they could be. The sterile investments do not generate additional productivity for the economy.
However, the situation could be even worse if productive enterprises that provide their input for economic development are transformed into sterile investments by criminal organisations because they are operated primarily for money laundering, and just secondly for profit generation.
It is obvious that investments must be driven by productive purposes, and if resources are dedicated to sterile investments, the overall economy of a country reduces. So, the war proclaimed to money laundering and terrorist financing is also the war for responding to consumer demand and stimulating the productivity of the overall economy.